Post-Brexit immigration rules –
not so bad for the finance sector?

19 December 2019

Hot on the heels of the general election outcome, this article sets out the likely new Conservative party immigration policies and rules for the finance sector.  In particular, it focuses on the impact of Brexit and the intention for the UK to have a new post-Brexit immigration system.  For the finance sector, the outlook is generally positive and although uncertainty remains and hoops will have to be jumped through, the new rules and systems should not be overly onerous.  Care still needs to be taken though, especially in terms of prevention of illegal working.

Brexit-related immigration changes in the finance sector

Given the UK, and particularly London, remains a central hub across Europe for the finance sector, free movement of people is of vital concern to the industry.  Whether it is staff travelling between London – Paris – Frankfurt for business meetings or work, careful consideration needs to be given to the changes to the UK immigration system.  The Conservative government has already implemented a system to change EU citizens’ rights to be in the UK from EU to UK law and, for the finance sector, it should be fairly smooth running.

Now that we know there is a Conservative majority, we have more certainty on the Brexit-related rules to be applied to EU citizens working in the UK.  Effectively, at least until the end of the transition period on 31 December 2020, EU citizens maintain free movement rights in the UK and can enter at will and work in the UK.  Boris Johnson fully intends for the UK to exit the EU with a deal by 31 January 2020 which would mean that EU citizens need to arrive in the UK by 31 December 2020 in order to be able to apply to register under the EU Settlement Scheme (the Scheme).  The Scheme has generally been well received and very few applications have been refused.  The basis of the application is that the applicant is resident in the UK and does not have a serious criminal conviction.  For those EU citizens arriving in the UK by 31 December 2020, the deadline for an application under the Scheme is currently 30 June 2021.

The withdrawal agreement has provision for the UK to ask before 1 July 2020 for an extension to the transition period of one or two years. However, it appears that Boris Johnson intends to legally prohibit the government from agreeing to an extension of the 11-month transition period.

Should the UK be unable to agree on a future relationship with the EU, there of course remains the chance that the UK could leave without a deal as early as 31 December 2020.  The UK has already notified of planned immigration rule changes should the UK leave with no deal, to include EU citizens arriving after that point having the option to apply for a three-year visa called European temporary leave to remain.  They would then be required to extend their stay as part of the new post-Brexit immigration system. 

Future post-Brexit immigration system plans

Over recent years we have seen the Conservative party’s immigration policies move from what was called a “hostile environment” to a “compliant environment”.  Such an approach led in part to FCA regulated institutions needing to check the immigration status of their new customers.  As part of the Conservative party manifesto, Boris Johnson guaranteed the UK would have an Australian-style Points Based System (PBS), despite the independent Migration Advisory Committee (MAC) being due to report next month on whether it is suitable for the UK.  Plus, the UK has already had a PBS since 2008, including Tier 2 which is widely used within the finance sector to sponsor skilled workers in the UK. 

The new system is likely to include Tier 2 or a very similar category.  Salary bandings in Tier 2 have long been used as part of the UK immigration system as a measure of whether a role is sufficiently skilled.  Given the higher than average salaries within the finance sector, we would not envisage that the rule changes would have a significant impact. The Home Office has a particular Tier 2 category for “high earners” where the applicant is earning over £159,600, meaning there is no need to test whether there is a resident worker who is suitable for the role or enter the monthly quota.  Likewise, for those who are entering the UK on an intra-company transfer basis, the five-year limit on staying in the UK is extended to nine years if the salary is over £120,000. As such, the finance sector is well placed in terms of taking advantage of beneficial rules based on higher salary levels.  That said, back office and regional staff may be affected by salary bandings and applications for them under the new post-Brexit immigration system may not be feasible.  Plus submitting Tier 2 applications and for EU citizens with the associated costs and compliance will be troubling.

Pitfalls to watch out for

Where employers hold a Sponsor Licence the Home Office will attend at their offices to check immigration compliance. A key feature of that audit is whether the company has sufficient policies in place to prevent legal working and if it has all documentation in place.  Where there are breaches, a civil penalty of up to £20,000 per worker can be issued or, in the worst cases where there is reasonable cause to believe the employer knew the individual did not have the right to work, criminal prosecution is a possibility.  As a result of immigration offences, there is a possibility for disqualification of company directors and potentially issues in terms of FCA regulation.  As part of the services that we provide to our clients, we give them a mock audit and compliance training to prepare them fully for the Home Office visit. We also regularly attend our client’s offices when the Home Office is due to visit for an audit. 

From a right to work perspective, EU citizens arriving in the UK up to 1 January 2021 do not need to be distinguished.  This makes it easy for employers to simply check the EU citizen’s passport or National ID Card up to that point.  However, beyond that date (if there is no further transition period) employers will need to decipher whether or not an EU citizen arriving in the UK is coming in for permitted business visitor activities or is working.  Given the movement of people between European offices within the finance sector, that could cause headaches for HR staff in the UK.

Further information

For further information on the issues raised in this blog, please contact Ilda de Sousa or another member of our immigration team.

About the author

Ilda de Sousa is a partner in the immigration team at Kingsley Napley. She is a South African qualified attorney and a British qualified solicitor with more  than ten years of UK corporate immigration law experience, managing large company clients as well as handling complex matters for individuals, British nationality applications, appeals, judicial reviews and applications under European Law including Brexit related advice. She also has extensive knowledge and experience in all aspects of the Points Based System and in advising investors, entrepreneurs and high-net worth individuals.

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